Consider the following transactions for Crazy Chef (Pty) Ltd, a manufacturer of frozen, ready-made meals that are stocked nationwide in most major supermarkets: Corporate Crazy Chef has enjoyed rapid growth in demand for its products and there is a need to purchase a number of industrial freezers to store the additional products produced as a result of the increased demand. Management has approved a supplier and are now in the process of raising capital to finance the purchase of the vehicles from the selected supplier. Part of the finance required for the freezers will be raised through the issue of 45 000, 8% bonds for R198 each on 1 January 2020. Interest on these bonds is payable semi-annually in arrears on 30 June and 31 December each year. The bonds are redeemable on 31 December 2023 for R345 000 in cash and the balance will be converted into 50 000 R2 ordinary shares in Crazy Chef. At inception, the market related interest rate of similar bonds is 11%. You have been provided with the following present value calculations at 1 January 2020 until redemption date: R Present value of interest payments only @ 11% 4 515 279 Present value of interest payments only @ 13% 4 330 062 Present value of the interest and R345 000 cash redemption value @ 11% 4 740 080 Present value of the interest and R345 000 cash redemption value @ 13% 4 548 521 Investment in Preference shares Crazy Chef holds an investment in 6% redeemable preference shares with a carrying amount of R375 000. The shares were purchased (at the nominal amount of R 375 000) on 1 July 2019 and mature on 30 June 2020 whereupon Crazy Chef is entitled to receive the nominal value of the shares including the preference dividend. Taking into account the recession and the current economic climate, management estimates at year end (31 December 2019) that there is a 60% chance Crazy Chef will receive the full nominal repayment including preference dividends due when the preference shares are redeemed. There is a 35% chance Crazy Chef will receive R 260 000 in full settlement and a 5% change they will only receive R 180 000 upon redemption. The credit risk on the investment was considered to be low at year and there was no significant subsequent increase in credit risk. The appropriate market related interest for similar shares is 8%. REQUIRED: a) Explain how the financial manager should account for the bonds by briefly discussing the classification, recognition and measurement of the bonds in the financial statements of Crazy Chef for the reporting period ended 31 December 2020. (7) b) Prepare all the journal entries relating to the bonds issued for the reporting period ended 31 December 2020 in the accounting records of Crazy Chef. (14) c) Calculate and journalise the expected credit losses related to the Investment in preference shares for the period ended 31 December 2019